Your water heater has a tank that is separated into two chambers. One side contains the fresh water from your tank that comes out of the faucet. The other side contains the engine coolant water that keeps your engine cool when operating. The incorporation of the heat exchanger is part of this system that goes to the water heater. When you are at the dock and plugged into shore power, the electric element heats the fresh water. This element sticks into the side of the tank that contains your fresh water from the tank and is sealed with a big rubber gasket that is compressed and held in place with probably 4 bolts, or some European models actually screw into place via the larger hole with threads. Anyway, as mentioned before, if your electric switch is on, so the element is hot, and there is no fresh water in the tank, the element will burn out. They are easy to replace, if you have good access, but switching it off when the tank in the heater is empty prevents the burn out of the element. That is why it is important to have a switch on the panel. The engine coolant part of the system circulates the same coolant (antifreeze) that is replenished in the reservoir on the top of the engine (like your car) through the other half of the water heater tank. When the engine coolant gets hot, this coolant, sandwiched next to the fresh water from your tank it heats up the fresh water in the water heater. So, to keep this operational, you want to make sure you have an adequate level of antifreeze (50:50 mix) in the system and all air has been bled out (usually only a problem when you replace the heater or have to replace hoses. Otherwise your engine can over heat and so you should consider this before other problem solving if you have recently done plumbing work to your water heater). Hope this helps explain how it all works.